Tuesday, March 6, 2012

Sorry, sir, we can’t afford to staunch this torrential oil spill

I'm now officially one month behind on the horrid oil spill in eastern Venezuela, which is pretty inexcusable, though I have to thank the The Economist, Gustavo at Caracas Chronicles and Setty for keeping an eye on this one.

Some absolutely staggering details about what happened out in the Guarapiche river in the state of Monagas at the Jusepin oil field surfaced in the last couple days. State oil company PDVSA still has not released any detailed information on how much crude was spilled, (Setty's got a great roundup of what has been said), but it's quite obvious that it was a lot worse than it needed to be.

An excellent story by David Gonzalez in El Nacional lays out the most glaring problem: at least two PDVSA managers refused to halt output even after the severing of a pipeline had been confirmed and a 30-meter column of oil was shooting into the air. They determined -- I shit you not -- that it would take too long to restart production if they shut it down. Text message exchanges documented in a report acquired by an opposition legislator show Edgar Sifontes, Deputy Operations Manager for PDVSA's El Furrial division, ordered employees not to shut the wells in because it would take some 20 days to get them back up and running. A second manager, Jose Marin, later refused orders from a higher-level PDVSA official to halt Jusepin's output, citing an order by Sifontes. The result? The pipeline ruptured at 8:40 a.m., and the field was still producing as late as 3:30 in the afternoon. Who knows how much longer the oil continued spilling.

I spent a while trying to fathom what could justify such mind-boggling, reckless incompetence. Even if the damages are considerably less than infamous Macondo Gulf of Mexico spill, the level of negligence here is simply head and shoulders above what BP was guilty of.My first instinct is that these PDVSA types have an almost visceral association with shutting things down because of their experience fighting off the 2002 oil strike, a clumsy and failed attempt to push Chavez out by force. This event has taken on the status of a creation myth in Venezuela's industry that oil workers invoke like a pastor preaching about the book of Genesis, and has led to a gut reaction that shutting anything down is tantamount to sabotage, treason and subversion.

But the reference to not wanting to lose 20 days of production makes me think these guys are under enormous pressure to produce oil revenue for a company already overstretched by commitments to build everything from houses to grocery stores. Somewhere in that calculus, Sifontes appears to have forgotten the irreparable damage that has likely been done to the Guarapiche River, the public health problems caused by fisherman cleaning out crude with their bare hands, and the monumental losses dumped on ranchers and farmers.Gonzalez's story shows the contingency planning was almost equally frightening.

“’We have to activate the National Contingency Plan, the situation is critical,’ reads the text message received by Felix Merchan, Manager of the El Furrial Division, from a subordinate. The executive firmly agrees in a clear message from his Blackberry: ‘Let’s activate it.’ The subordinate then asks a disconcerting question: ‘What is the procedure?’”

PDVSA has kept details of these plans from being published, which was apparently standard procedure before Chavez and is similar to what other countries do. But the basic outlines are clear.

“Within four hours the goal is clear: to carry out the deployment of ‘all the equipment specified by the local plan … and to protect sensitive environments.’ But during this period, the managers were still debating what steps should be taken.”

National Assembly deputy Hiram Gaviria has filed a copy of the report containing these exchanges to the prosecutor’s office. What will likely follow is a charade in which state prosecutors explain this incident away as a minor mishap that warrants no further investigation, much less criminal sanctions against employees of the state oil company.

It would have been nice for PDVSA to be able to blame this incident on an oil major, like possibly Total, which ran the field until was nationalized in 2006. The Brazilians, after all, have managed to lodge an $11 billion complaint against Chevron for spilling close to 3,000 barrels of oil – by most accounts as little as 5 percent of the Monagas spill. But then again it’s easy to go after the Seven Sisters and their ilk, and a lot tougher for a government to crack down on an oil company it owns and runs.